Quarterly Report for Quarter Ending February 28, 2026 (Form 10-Q)

Management's Discussion and Analysis of Financial Condition and Results of Operations.

This Management's Discussion and Analysis of Financial Condition and Results of Operations should be read in conjunction with the Unaudited Interim Consolidated Financial Statements and the related Notes thereto for the three month period ended February 28, 2026 contained in this Quarterly Report on Form 10-Q ("Form 10-Q") and the Audited Consolidated Financial Statements and the related Notes thereto contained in our Annual Report on Form 10-K for the fiscal year ended May 31, 2025, as well as in conjunction with the sections entitled "Item 1A. Risk Factors" and "Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations" in our Annual Report on Form 10-K for the fiscal year ended May 31, 2025 and in the section entitled "Item 1A. Risk Factors" in this Form 10-Q. Forward looking statements in this Form 10-Q are qualified by the cautionary statement included in this Form 10-Q under the sub-heading "Cautionary Note Regarding Forward-Looking Statements" in the introduction of this Form 10-Q.

Company Overview

Tilray Brands, Inc., a Delaware corporation (collectively, along with its subsidiaries, the "Company", "Tilray", "we", "us" and "our"), is a leading global lifestyle consumer products company, which was incorporated on January 24, 2018 and is headquartered in Leamington and New York, with operations in Canada, the United States, Europe, Australia and Latin America that is leading as a transformative force at the nexus of cannabis, beverage, wellness, and entertainment, elevating lives through moments of connection. Tilray's mission is to be a leading premium lifestyle company with a house of brands and innovative products that inspire joy, wellness and create memorable experiences.

Our overall strategy is to leverage our brands, infrastructure, expertise and capabilities to drive revenue growth in the industries in which we compete, achieve industry-leading profitability and build sustainable, long-term shareholder value. In order to ensure the long-term sustainable growth of our Company, we continue to focus on developing strong capabilities in data analytics and consumer insights, drive category management leadership and assess opportunities for the introduction of new categories, products and entries into new geographies. In addition, we are relentlessly focused on managing our cost structure and expenses in order to maintain our strong financial position. Finally, our experienced leadership team provides a strong foundation to accelerate our growth. Our management team is complemented by experienced operators, cannabis industry experts, veteran beer and beverage industry leaders and leaders that are well-established in wellness and better-for-you products, all of whom apply an innovative and consumer-centric approach to our businesses.

Trends and Other Factors Affecting Our Business

Beverage market trends:

Within the beverage category, we expect the following key trends to continue to shape the near-term outlook in this segment:

The cannabis industry in Canada continues to evolve given how nascent the industry is with federal legalization of adult-use cannabis occurring just over five years ago. Through analysis of the current market conditions, the following key trends have emerged and are anticipated to influence the near-term future in the Canadian cannabis industry:

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Market share. During the fiscal quarter, Tilray continued to lead the Canadian market with the highest cannabis revenue in Canada. However, during the fiscal quarter, we experienced a decrease in market share in Canada from 9.3% to 8.5% from the immediately preceding quarter as reported by Hifyre data for all provinces, excluding Quebec where Weedcrawler was deemed more accurate. The decline primarily reflected a 175 basis point decrease in the whole flower category resulting from a planned cultivation strain rotation that temporarily impacted supply, and a 728 basis point decrease in the straight-edge pre-roll category due to an out-of-stock experienced by a componentry vendor despite maintaining a market leading position within this category. These declines were partially offset by a 547 basis point increase in the blunts category. The Company continues to enhance its global supply chain and expand its cultivation footprint to support demand across Canadian and international markets. During the fiscal quarter ended February 28, 2025, the Company opportunistically redirected approximately 0.8 Metric Tons to international markets, which are expected to generate higher margin sales.

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Consumer preferences and Price compression. Licensed producer consolidation has progressed more gradually than anticipated, while retailer consolidation has increased the negotiating leverage of larger retailer accounts. At the same time, consumer preferences continue to evolve. Demand is shifting toward manufactured formats such as infused pre-rolls, beverages, edibles, and vapes, reflecting a broader premiumization and convenience trend within the category. Historical price compression in specific categories is expected to persist in the market, intensified by fierce competition among the approximately 1,000 Licensed Producers in Canada. The fixed impact of excise per gram, notwithstanding the decline in average selling prices, further compounds these challenges, and has promoted ongoing industry lobbying efforts.

International cannabis trends:

We are a global leader in the development, production, distribution, marketing and sale of pharmaceutical-grade medical cannabis products. The cannabis industry in Europe is still in its early stages of development and countries within Europe are at different stages of medical cannabis legalization. Meaningful progress in the legalization and regulation of cannabis for medical purposes, has now taken place in more than 21 countries representing a population of more than 526 million people (Germany, UK, Italy, Poland, Netherlands, Czech Republic, Greece, Portugal, Austria, Switzerland, Denmark, Croatia, Malta, Luxembourg, Ukraine, Sweden, Norway, Türkiye, Ireland, Spain and Israel). Beyond this, some countries have expressed a clear political ambition to legalize adult-use cannabis (Portugal and Luxembourg), some are engaging in programs for adult-use legalization (Germany, Netherlands, Malta, Czech Republic and Switzerland) and some are debating regulations for cannabinoid-based medicine (France). In Europe, we believe that, despite continuing recessionary economic conditions, political uncertainty in various countries and the continuing Russian conflict with Ukraine, cannabis legalization (both medicinal and adult-use) will continue to gain traction albeit more slowly than originally expected. This is evidenced by the cannabis regulations in Germany adopted on April 1, 2024, which we believe will serve as a catalyst for continued changes in drug policy throughout Europe. Outside of Europe and North America, the cannabis industry is also continuing to develop with Australia representing one of the larger markets and with some Latin American countries also growing their respective medical cannabis markets, such as Argentina, Panama, Colombia and Brazil.

We continue to believe that Tilray remains uniquely well-positioned to maintain and gain significant market share in the markets in which we participate. We benefit from our end-to-end vertically-integrated infrastructure in major markets and well-placed investments, which are comprised of two EU-GMP cultivation facilities located in Portugal and Germany; our fully owned route-to-market encompassing sales, marketing and distribution infrastructure in Germany, Australia and Italy; a network of leading distributors who we work with in the various other countries in which we participate; and, our extensive genetics portfolio and demonstrated commitment and expertise related to the cultivation and production of high-quality, safe cannabis products. Tilray's International business also benefits from the depth and breadth of knowledge, experience, relationships and infrastructure we have gleaned from our leading participation and investment into the Canadian medical and adult-use markets. Tilray is proudly pioneering the effort to further understand the therapeutic value of cannabis through strategic partnerships with leading research institutions globally where Tilray is currently supporting clinical trials around the world studying the efficacy of cannabis in treading various indications. We believe that these assets and attributes, combined with our ability to navigate complex regulatory environments, will continue to drive our leadership in international medical markets and allow us to successfully enter new markets as they adopt medical cannabis and potentially adult-use regulations and may also serve to support a potential U.S. participation.

Germany. Today, Germany remains the largest medical cannabis market in Europe.

We continue to believe that Tilray is well-positioned in Germany, especially considering the enactment of MedCanG and given that we are one of only three manufacturers of medical cannabis in Germany since our wholly owned subsidiary, Aphria RX, was awarded the first license for the cultivation of medical cannabis in Germany by the BfArM under the liberalized regime. Said license improves our ability to meet the needs of patients and provides cannabis of the utmost quality and enhanced availability to a broader market.

As the market continues to mature, we have seen increased demands and differentiation specifically with medical cannabis flowers. In response, we have launched ARX and Good Supply brands and related medical cannabis products, which provides the patient with a segmented portfolio of products while we continue to deliver on the trust, safety and consistency that has become expected from our Tilray Medical brand.

Poland. In Poland, cannabis was legalized for medical use in 2018 and is prescribed to patients by a physician and dispensed by pharmacies. Today, all doctors in Poland are allowed to prescribe medical cannabis and it is a self-pay market as medical cannabis is not refundable by the Polish health service. Tilray is a leading supplier of medical cannabis in Poland through our network of distributor partnerships. We predominantly supply the market with whole flower medical cannabis products.

United Kingdom. Since November 2018, doctors in the UK have been able to prescribe medical cannabis for medicinal use for patients with medical conditions that had failed to respond to first-line medications. The market today is predominantly all self-pay and prescriptions are facilitated by private clinics. Today, we supply the UK market with mainly whole flower products from brands such as Good Supply through our distributor partners with sights on growing our portfolio to extracts and other formats.

Ireland. In June 2019, the Minister for Health signed legislation allowing for the operation of the Medical Cannabis Access Programme ("MCAP") on a pilot basis for five years. The MCAP allows a medical consultant to prescribe a cannabis-based treatment for a narrow set of specified medical conditions, where the patient has failed to respond to standard treatment. Reimbursement is available for products which have received the appropriate approvals. Tilray was one of the first players to enter the Irish market and is one of a few suppliers which has received approval for its products to be prescribed and to have been granted reimbursement status. Today, we supply our approved extract product to Ireland through our distribution partner.

Italy. In May 2023, Tilray Medical received authorization from Italy's Ministry of Health to distribute three new medical cannabis compounds. These medical cannabis compounds are distributed by Tilray medical Italia to pharmacies across Italy. We have an established broad national pharmaceutical distribution network in Italy, where medical cannabis is prescribed by doctors and reimbursed by the healthcare system to eligible patients. In 2025, Tilray has received additional cannabis flower and extract product authorizations and has formed a strategic partnership with Molteni Farmaceutici with the commitment to broaden the availability of Tilray Medical products for patients across Italy.

Australia. In 2016, the Australian Government legalized medicinal cannabis, which is regulated by the Therapeutic Goods Administration. Medical cannabis is prescribed by a doctor but there is no coverage under the Pharmaceutical Benefits Scheme. Tilray Medical supplies the market with a wide portfolio of medical cannabis extracts as well as whole flower products. As the market continues to mature, we have seen increased demands and differentiation specifically with medical cannabis flowers. In response, we launched the Broken Coast, Redecan and Good Supply brands and products, which provides the patient with a segmented portfolio of products while we continue to deliver on the trust, safety and consistency that has become expected from our Tilray Medical brand.

Luxembourg. Luxembourg established its medical cannabis framework in 2018, with the national program operational since February 2019. Medical cannabis is tightly regulated, accessible only through trained physicians and dispensed exclusively via hospital pharmacies. Prescriptions are limited to patients with defined, severe medical conditions, and all treatments are covered by public health insurance. In January 2025, Luxembourg updated its regulations to phase-out high-THC flower products, now permitting only balanced or high-CBD flower and oil-based extracts. This shift reflects the government's commitment to standardized, pharmaceutical-grade cannabis therapies and patient safety. Tilray Deutschland GmbH was awarded the official government tender in 2025 to supply medical cannabis flower, demonstrating our leadership in centralized procurement and compliance with Luxembourg's rigorous standards.

Portugal. Portugal legalized medical cannabis in July 2018. The regulatory framework is overseen by INFARMED, requiring Market Placement Authorization (ACM) for all non-pharmaceutical cannabis products, with strict GACP and GMP compliance. While domestic patient access remains limited due to stringent product approvals and the absence of public reimbursement, Portugal has emerged as a leading European producer and exporter of medical cannabis, supplying high-value markets such as Germany, Poland, and Australia. In 2021, Tilray received the first Authorization for Placement on the Market for dried flower, with additional product approvals in 2024, reinforcing our pioneering role in Portugal's medical cannabis sector. Our strategic investments in cultivation and manufacturing, combined with robust compliance and documentation standards, enable Tilray to deliver EU-GMP quality products to both domestic and international markets. As Portugal explores adult-use reform, we expect that Tilray's established reputation and operational excellence position us to capitalize on future regulatory developments and market expansion.

Wellness market trends:

Tilray Wellness's branded business continues to grow across brick-and-mortar retail as well as ecommerce, which we believe further establishes its leading market share position in better-for-you categories. The Company continues to focus on value-added innovation within natural and organic food and beverages across branded and ingredient sales. We continue to participate in multiple growing categories including super-seeds, better for you breakfast, better for you snacking, and natural energy drinks. Within our Ingredients sales business, we have expanded our range of offerings in hemp protein and hemp oil, helping us further develop our business in North America and Asia.

Acquisitions, Strategic Transactions and Synergies

We strive to continue to expand our business, on a consolidated basis, through a combination of organic growth and acquisition. While we continue to execute against our strategic initiatives that we believe will result in long-term, sustainable growth and value to our stockholders, we continue to evaluate potential acquisitions and other strategic transactions of businesses that we believe complement our existing portfolio, infrastructure and capabilities or provide us with the opportunity to enter attractive new geographic markets and product categories as well as expand our existing capabilities. In addition, we have exited certain businesses and continue to evaluate certain businesses within our portfolio that are dilutive to profitability and cash flow. As a result, we incur transaction costs in connection with identifying and completing acquisitions and strategic transactions, as well as ongoing integration and restructuring costs as we combine acquired companies and continue to achieve synergies, which is offset by income generated in connection with the execution of these transactions. For the nine months ended February 28, 2026, we incurred $2.9 million of transaction expenses, as discussed further below in the results of operations assessment.

BrewDog Acquisitions:

Subsequent to the period ended February 28, 2026, on March 2, 2026, Tilray UK, a wholly owned subsidiary of the Company, entered into the BrewDog BASA. Under the BrewDog BASA, Tilray UK acquired certain business operations and assets of BrewDog plc and certain of its subsidiary undertakings (collectively, the "BrewDog Group") through a pre-packaged administration process in Scotland under the Insolvency Act 1986, with the intent for Tilray UK to carry on the acquired business operations and assets as a going concern. The assets acquired included the UK Brewery, the online business, the retail business, 11 of the BrewDog strategic brewpubs in Scotland, England and Ireland and all the intellectual property rights relating to the BrewDog brand, including well known sub-brands such as Punk IPA, Hazy Jane, Wingman, Elvis Juice and Dead Pony Club. The purchase price was £33.0 million (approximately $44.1 million).

In a separate transaction completed on March 9, 2026, the Company acquired BrewDog Brewing Australia Pty Ltd., which included BrewDog's Australian brewery, along with two hospitality venues in Australia for a nominal consideration.

On March 16, 2026, Tilray BrewDog U.S., Inc., a wholly-owned subsidiary of the Company, entered into an asset purchase agreement to acquire certain strategic BrewDog assets in the U.S., including a brewery, pub, and hotel in Columbus, Ohio, as well as pubs located in New Albany, Ohio, Cleveland, Ohio, and Las Vegas, Nevada. The purchase price for BrewDog's U.S. assets is equal to $9.3 million.

On March 23, 2026, the Company acquired 5 additional BrewDog brewpubs in Scotland and England for a purchase price of £0.3 million (approximately $0.5 million). See Note 26 (Subsequent Events).

One of the world's most recognized names in craft beer, BrewDog is a brand-powered, vertically integrated beverage and hospitality platform. Founded in 2007, BrewDog quickly became one of the largest independent craft beer brands in the United Kingdom with its portfolio of iconic craft, premium and low and no alcohol beer brands, including Punk IPA, Hazy Jane, Lost Lager and Wingman. From its beginnings in the UK, it developed its strong global brand awareness through its global expansion via international breweries, localized brewpubs and strategic partnerships.

These acquisitions present an important step for the Company as it executes against its previously announced strategic initiative to expand its beverage platform into the international markets, The strong global awareness of the BrewDog brand, together with its international brewing infrastructure and experiential pubs, presents an opportunity for growth in the UK, Europe and previously untapped international markets, including the Asia Pacific region. Further, the acquisition of the BrewDog U.S. aligns with our "regional jewel" strategy as BrewDog has built a strong brand in Ohio, which supports and strengthens our presence in the Midwest and provides us with a highly visible presence in Las Vegas, including a flagship brewpub located on a premier stretch of the Las Vegas Strip.

Beverage segment Project 420:

In November 2020, we entered the beverage category with the acquisition of SweetWater Brewing Company, one of the largest independent craft brewers in the U.S. by volume, with the vision of creating a more diversified global lifestyle consumer products company.

This initial acquisition provided us with a foundation to pursue additional acquisitions in the beverage category and scale our business on a national basis. We acquired Alpine Beer Company, Green Flash and Breckenridge Distillery in December 2021, Montauk Brewing Company in November 2022, Craft Acquisition I in October 2023 and Craft Acquisition II in September 2024.

With Craft Acquisition I and Craft Acquisition II, we capitalized on opportunities to acquire additional beverage businesses that consisted of strong brands in decline due to lack of focus and in need of investment in order to promote growth, all at a significantly reduced purchase price. To support the growth of these acquired brands and establish a clear path to profitability, we implemented Project 420, which is a comprehensive plan covering (i) SKU optimization/rationalization; (ii) Geographic rationalization; (iii) Distributor rationalization; and (iv) synergy optimization plan through which we expect to invest in the acquired brands for growth and improve profitability:

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SKU optimization/rationalization - In response to the declining growth in the craft beer industry and consolidation of distributors, we are working with our distributors in various markets to streamline our portfolio by eliminating duplicative, lower margin and slower growth products, which has the immediate effect of reducing revenue. However, by eliminating these slower moving and lower margin SKUs, we are able to focus our attention and resources on our higher margin and faster growing SKUs, as well as the introduction of new innovation, which we expect will accelerate our revenue growth in future quarters.

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Geographic rationalization - On a consolidated basis, we generate sales in all states however, our brands are significantly stronger in their home markets. For example, SweetWater is located in Georgia and, as a result, its revenues are stronger in Georgia, Alabama, North Carolina and Florida, while 10 Barrel, which is located in Oregon has stronger revenue in Oregon, Washington, Idaho and Wyoming. In away markets, like Oregon for SweetWater, and Georgia for 10 Barrel, the brands are not as strong and so distribution is de-empathized. Our geographic rationalization works to concentrate our efforts in individual states with our strongest brands in those states. As we reduce the distribution of away markets brands in those states, we are working to increase the distribution and shelf space of home market brands. This initiative is consistent with our Regional Jewel strategy developed in conjunction with the Boston Consulting Group two years ago.

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Distributor rationalization - As a result of our various acquisitions in the last five years, we have over 750 distributors and 975 distributor shipping locations. As a result, we are shipping to multiple distributors in the same geography as well as splitting the allocation of local brands between multiple distributors. The goal of the distributor rationalization is to reduce our distributor footprint down to between 450 and 500 distributors, concentrating those distributors' effort on our brands and SKUs, while minimizing logistical complexities.

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Synergy optimization plan - We previously announced a $33.0 million synergy plan focused on optimizing our production footprint and eliminating redundancies in manufacturing and warehouse assets. By integrating the newly acquired facilities into our existing footprint, we are optimizing capacities, utilization and better absorbing fixed overheads. This in turn is improving our gross margins. As of the fiscal quarter ended February 28, 2026, we have completed the synergy optimization plan achieving the $33.0 million target. While this initiative is complete, management remains focused on disciplined cost management and continues to advance additional cost-saving initiatives across the business to drive further margin improvement and operating efficiency.

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Brand and business investment - We have been and are continuing to increase our investment in the marketing, promotion and infrastructure of our core brands in order to re-establish their dominance in their home markets. Our intention is to fund this investment through the cost savings and synergies achieved through Project 420.

It is important to note, however, that there is a lag between the discontinuation of the SKUs and the associated reduction in revenue, which has an immediate effect, and the acceleration of the growth of our existing SKUs and the introduction of new innovation and the associated increase in revenue, which takes time due to retailer resets. We also expect these efforts will lead to improved sales and margins, with benefits realized through lower selling costs, as well as reduced requirements for working capital through inventory reductions and an improvement in our cash conversion cycle.

Political and Economic Environment

Our results of operations may continue to be affected by economic, political, legislative, regulatory, legal actions, global volatility and general market disruption resulting from geopolitical tensions, such as Russia's continued incursion into Ukraine, the ongoing events in the Middle East, including the conflict involving Iran, and political uncertainty in certain countries in Europe. Escalation of hostilities in the Middle East, including involving Iran, could further disrupt global energy markets, fuel prices, transportation networks, and supply chains, particularly in Europe, which may indirectly impact operating costs and consumer demand. Economic conditions, such as recessionary trends, inflation, supply chain disruptions, interest and monetary exchange rates, government fiscal policies, and the recent economic uncertainties resulting from certain changes in U.S. global economic policy, including changes on global trade policies can have a significant effect on operations. More specifically, there are no expected impacts on revenue from the recently enacted U.S. tariffs and foreign enacted retaliatory tariffs ("Tariffs"). From a cost perspective, we believe the recently enacted Tariffs could impact input materials such as aluminum, hops, barley, malt and vape componentry, which are partially imported but we intend to mitigate these impacts to the extent possible.

In addition, U.S. federal regulatory developments regarding cannabis rescheduling represent a significant shift in the political and legislative environment. This regulatory evolution is expected to create a more credible framework for medical cannabis research, clinical development, and compliance, aligning with Tilray's established global expertise in regulated medical cannabis markets; although, there are no assurances whether such rescheduling will be implemented as and when anticipated. The Company intends to leverage its proven compliance infrastructure, scientific knowledge, and operational scale to expand responsibly in the U.S. market, introducing medical-grade cannabis products in targeted therapeutic formats. While these developments present significant long-term growth opportunities, they also introduce new regulatory complexities and potential risks that we will continue to monitor closely.

Reverse Stock Split

Effective December 2, 2025, we implemented a Reverse Stock Split of our outstanding shares of Common Stock, at a ratio of one-for-ten.

No fractional shares were issued in connection with the Reverse Stock Split. Fractional shares resulting from the Reverse Stock Split were rounded down to the nearest whole share and stockholders received cash in lieu of any fractional shares that were created by the Reverse Stock Split, see Note 14 (Stockholder's equity) for additional details. Each stockholder's percentage ownership interest in the Company and proportional voting power remained unchanged as a result of the Reverse Stock Split, except for adjustments that resulted from rounding fractional shares down to whole shares.

All issued and outstanding Common Stock, per share amounts, and outstanding equity instruments and awards exercisable into Common Stock contained in the condensed interim consolidated financial statements of the Company and notes thereto have been retroactively adjusted to reflect the Reverse Stock Split for all current and prior periods presented.

Results of Operations

Our consolidated results in thousands, except for per share data, are as follows:

		For the three months ended																For the nine months ended
		February 28,				February 28,				Change				% Change				February 28,				February 28,				Change				% Change
(in thousands of U.S. dollars)		2026				2025				2026 vs. 2025								2026				2025				2026 vs. 2025
Net revenue		$	206,732			$	185,780			$	20,952				11	%		$	633,740			$	596,774			$	36,966				6	%
Cost of goods sold			151,778				133,769				18,009				13	%			463,820				423,837				39,983				9	%
Gross profit			54,954				52,011				2,943				6	%			169,920				172,937				(3,017	)			(2	)%
Operating expenses:
General and administrative			50,228				39,246				10,982				28	%			142,456				129,356				13,100				10	%
Selling			10,617				13,905				(3,288	)			(24	)%			35,321				41,757				(6,436	)			(15	)%
Amortization			5,106				23,182				(18,076	)			(78	)%			13,393				67,913				(54,520	)			(80	)%
Marketing and promotion			8,692				6,793				1,899				28	%			28,828				28,079				749				3	%
Research and development			62				85				(23	)			(27	)%			181				250				(69	)			(28	)%
Change in fair value of contingent consideration			-				-				-				NM				(15,000	)			-				(15,000	)			NM
Impairment of intangible assets and goodwill			-				699,235				(699,235	)			(100	)%			-				699,235				(699,235	)			(100	)%
Other than temporary change in fair value of convertible notes receivable			-				20,000				(20,000	)			(100	)%			-				20,000				(20,000	)			(100	)%
Litigation costs, net of recoveries			621				2,758				(2,137	)			(77	)%			2,497				5,254				(2,757	)			(52	)%
Restructuring costs			4,087				6,133				(2,046	)			(33	)%			5,921				17,249				(11,328	)			(66	)%
Transaction costs (income), net			1,927				605				1,322				219	%			2,896				2,563				333				13	%
Total operating expenses			81,340				811,942				(730,602	)			(90	)%			216,493				1,011,656				(795,163	)			(79	)%
Operating loss			(26,386	)			(759,931	)			733,545				(97	)%			(46,573	)			(838,719	)			792,146				(94	)%
Interest expense, net			(4,965	)			(8,378	)			3,413				(41	)%			(17,035	)			(25,986	)			8,951				(34	)%
Non-operating (expense) income, net			8,092				(24,022	)			32,114				(134	)%			(386	)			(44,631	)			44,245				(99	)%
Loss before income taxes			(23,259	)			(792,331	)			769,072				(97	)%			(63,994	)			(909,336	)			845,342				(93	)%
Income tax expense (recovery), net			1,974				1,203				771				64	%			3,235				4,125				(890	)			(22	)%
Net loss		$	(25,233	)		$	(793,534	)		$	768,301				(97	)%		$	(67,229	)		$	(913,461	)		$	846,232				(93	)%

Use of Non-GAAP Measures

Throughout this Management's Discussion and Analysis of Financial Condition and Results of Operations in this Quarterly Report on Form 10-Q, we discuss non-GAAP financial measures, including references to:

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adjusted gross profit (excluding purchase price allocation ("PPA") step up) consolidated and for each reporting segment (Cannabis, Beverage, Distribution and Wellness),

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adjusted gross margin (excluding PPA step up) consolidated and for each reporting segment (Cannabis, Beverage, Distribution and Wellness),

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adjusted EBITDA,

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cash, restricted cash and marketable securities, and

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constant currency presentation of net revenue (by segment and consolidated).

These non-GAAP financial measures should be considered in addition to, and not in lieu of, the financial measures calculated and presented in accordance with generally accepted accounting principles in the United States of America, ("GAAP"). These financial measures, which may be different than similarly titled financial measures used by other companies, are presented to help investors' overall understanding of our financial performance and should not be considered a substitute for, or superior to, the financial information prepared and presented in accordance with GAAP. Please see "Reconciliation of Non-GAAP Financial Measures to GAAP Measures" below for reconciliation of such non-GAAP financial measures to the most directly comparable GAAP financial measures, as well as a discussion of our adjusted gross margin, adjusted gross profit and adjusted EBITDA measures and the calculation of such measures.

Constant Currency Presentation

We believe that this financial measure provides useful information to investors because it eliminates the effect that foreign currency exchange rate fluctuations may have on period-to-period comparability given the volatility in foreign currency exchange markets and therefore, provides greater transparency to the underlying performance of our consolidated net sales. To present this information for historical periods, current period net sales for entities reporting in currencies other than the U.S. Dollar are translated into U.S. Dollars at the average monthly exchange rate in effect during the corresponding period of the prior fiscal year rather than at the actual average monthly exchange rate in effect during the current period of the current fiscal year. As a result, the foreign currency impact is equal to the current year results in local currencies multiplied by the change in average foreign currency exchange rate between the current fiscal period and the corresponding period of the prior fiscal year.

Cash, restricted cash and Marketable Securities

The Company combines the Cash and cash equivalent financial statement line item, the restricted cash financial statement line and the Marketable securities financial statement line item as an aggregate total as reconciled in the liquidity and capital resource section below. The Company's management believes that this presentation provides useful information to management, analysts and investors regarding certain additional financial and business trends relating to its short-term liquidity position by combining these three GAAP metrics.

Operating Metrics and Non-GAAP Measures

We use the operating metrics and non-GAAP measures set forth in the table below to evaluate our business and operations, measure our performance, identify trends affecting our business, project our future performance, and make strategic decisions. Other companies, including companies in our industry, may calculate operating metrics and non-GAAP measures with similar names differently which may reduce their usefulness as comparative measures. Certain variances are labeled as not meaningful ("NM") throughout management's discussion and analysis.

		For the three months ended								For the nine months ended
		February 28,				February 28,				February 28,				February 28,
(in thousands of U.S. dollars)		2026				2025				2026				2025
Net beverage revenue		$	42,558			$	55,921			$	148,380			$	174,974
Net cannabis revenue			64,828				54,274				196,871				181,175
Distribution revenue			82,963				61,493				242,286				197,175
Wellness revenue			16,383				14,092				46,203				43,450
Beverage costs			28,977				35,986				97,741				106,961
Cannabis costs			38,858				32,275				121,497				111,804
Distribution costs			72,951				55,936				213,293				175,281
Wellness costs			10,992				9,572				31,289				29,791
Adjusted gross profit (excluding PPA step-up) (1)			54,954				52,070				169,920				174,547
Beverage adjusted gross margin (excluding PPA step-up) (1)			32	%			36	%			34	%			40	%
Cannabis adjusted gross margin (excluding PPA step-up) (1)			40	%			41	%			38	%			38	%
Distribution gross margin			12	%			9	%			12	%			11	%
Wellness gross margin			33	%			32	%			32	%			31	%
Adjusted EBITDA (1)		$	10,715			$	9,040			$	29,261			$	27,391
Cash, restricted cash and marketable securities (1) as at the period ended:			264,817				248,414				264,817				248,414
Working capital as at the period ended:		$	461,218			$	424,115			$	461,218			$	424,115

⁽¹⁾ Adjusted EBITDA, adjusted gross profit (excluding PPA step-up) and adjusted gross margin (excluding PPA step-up) for each of our segments, and cash, restricted cash and marketable securities are non-GAAP financial measures. See "Use of Non-GAAP Measures" above for a discussion of these Non-GAAP measures and "Reconciliation of Non-GAAP Financial Measures to GAAP Measures" below for a reconciliation of these Non-GAAP Measures to our most comparable GAAP measure and the discussion above captioned "Cash and Marketable Securities."

Segment Reporting

For the three and nine months ended February 28, 2026 and February 28, 2025, respectively, our reporting segments net revenue was comprised of net revenues from our beverage, cannabis, distribution, and wellness operations as follows:

		For the three months ended																For the nine months ended
		February 28,				February 28,				Change				% Change				February 28,				February 28,				Change				% Change
(in thousands of U.S. dollars)		2026				2025				2026 vs. 2025								2026				2025				2026 vs. 2025
Beverage business		$	42,558			$	55,921			$	(13,363	)			(24	)%		$	148,380			$	174,974			$	(26,594	)			(15	)%
Cannabis business			64,828				54,274				10,554				19	%			196,871				181,175				15,696				9	%
Distribution business			82,963				61,493				21,470				35	%			242,286				197,175				45,111				23	%
Wellness business			16,383				14,092				2,291				16	%			46,203				43,450				2,753				6	%
Total net revenue		$	206,732			$	185,780			$	20,952				11	%		$	633,740			$	596,774			$	36,966				6	%

For the three and nine months ended February 28, 2026 and February 28, 2025, respectively, our reporting segment net revenue on a constant currency⁽¹⁾ basis was as follows:

		For the three months ended																For the nine months ended
		as reported in constant currency																as reported in constant currency
		February 28,				February 28,				Change				% Change				February 28,				February 28,				Change				% Change
(in thousands of U.S. dollars)		2026				2025				2026 vs. 2025								2026				2025				2026 vs. 2025
Beverage business		$	42,558			$	55,921			$	(13,363	)			(24	)%		$	148,380			$	174,974			$	(26,594	)			(15	)%
Cannabis business			60,257				54,274				5,983				11	%			191,792				181,175				10,617				6	%
Distribution business			73,969				61,493				12,476				20	%			223,636				197,175				26,461				13	%
Wellness business			16,051				14,092				1,959				14	%			46,066				43,450				2,616				6	%
Total net revenue		$	192,835			$	185,780			$	7,055				4	%		$	609,874			$	596,774			$	13,100				2	%

(1)

The constant currency presentation of our net revenue based on reporting segment is a non-GAAP financial measure. See "Use of Non-GAAP Measures -Constant Currency Presentation" above for a discussion of these Non-GAAP Measures.

For the three and nine months ended February 28, 2026 and February 28, 2025, respectively, our geographic net revenue was as follows:

		For the three months ended																For the nine months ended
		February 28,				February 28,				Change				% Change				February 28,				February 28,				Change				% Change
(in thousands of U.S. dollars)		2026				2025				2026 vs. 2025								2026				2025				2026 vs. 2025
USA		$	51,683			$	64,420			$	(12,737	)			(20	)%		$	173,482			$	200,053			$	(26,571	)			(13	)%
Canada			48,221				45,930				2,291				5	%			160,561				158,555				2,006				1	%
EMEA			104,955				72,386				32,569				45	%			293,363				229,312				64,051				28	%
Rest of World			1,873				3,044				(1,171	)			(38	)%			6,334				8,854				(2,520	)			(28	)%
Total net revenue		$	206,732			$	185,780			$	20,952				11	%		$	633,740			$	596,774			$	36,966				6	%

For the three and nine months ended February 28, 2026 and February 28, 2025, respectively, our geographic net revenue on a constant currency⁽¹⁾ basis was as follows:

		For the three months ended																For the nine months ended
		as reported in constant currency																as reported in constant currency
		February 28,				February 28,				Change				% Change				February 28,				February 28,				Change				% Change
(in thousands of U.S. dollars)		2026				2025				2026 vs. 2025								2026				2025				2026 vs. 2025
USA		$	51,683			$	64,420				(12,737	)			(20	)%		$	173,482			$	200,053				(26,571	)			(13	)%
Canada			46,018				45,930				88				0	%			159,867				158,555				1,312				1	%
EMEA			92,938				72,386				20,552				28	%			269,337				229,312				40,025				17	%
Rest of World			2,196				3,044				(848	)			(28	)%			7,188				8,854				(1,666	)			(19	)%
Total net revenue		$	192,835			$	185,780			$	7,055				4	%		$	609,874			$	596,774			$	13,100				2	%

(1)

The constant currency presentation of our net revenue based on geographic segment is a non-GAAP financial measure. See "Use of Non-GAAP Measures -Constant Currency Presentation" above for a discussion of these Non-GAAP Measures.

As of February 28, 2026 and May 31, 2025, respectively, our geographic capital assets were as follows:

		February 28,				May 31,				Change				% Change
(in thousands of U.S. dollars)		2026				2025				2026 vs. 2025
USA		$	188,500			$	200,003			$	(11,503	)			(6	)%
Canada			251,645				267,458				(15,813	)			(6	)%
EMEA			98,571				97,371				1,200				1	%
Rest of World			4,292				3,601				691				19	%
Total capital assets		$	543,008			$	568,433			$	(25,425	)			(4	)%

Beverage revenue

Net revenue from our Beverage segment decreased to $42.6 million and to $148.4 million for the three and nine months ended February 28, 2026, compared to revenue of $55.9 million and $175.0 million for the prior year periods. The decline was primarily attributable to continued industry-wide challenges across the craft beer, spirits, and brewpub categories and broader competitive pressures, which resulted in lower volumes sold. Additionally, the decline was driven in part by margin-focused actions, which reduced net revenue by approximately $3.0 million and $13.6 million during the three and nine month periods, respectively. Lastly, the HD-D9 category was negatively impacted by U.S. federal legislation that was recently enacted which will restrict the future production and sale of our HD-D9 beverages and reduced net revenue by approximately $1.0 million during the three and nine month periods, respectively.

For the three and nine months ended February 28, 2026, these impacts were partially offset by the inclusion of sales from Craft Acquisition II, effective September 1, 2024, which were not reflected in the full comparative period and would have increased the nine month revenue for the period ended February 28, 2025 by approximately $13.6 million.

Cannabis revenue

For the three and nine months ended February 28, 2026 and February 28, 2025, respectively, cannabis net revenue based on market channel was as follows:

		For the three months ended																For the nine months ended
		February 28,				February 28,				Change				% Change				February 28,				February 28,				Change				% Change
(in thousands of US dollars)		2026				2025				2026 vs. 2025								2026				2025				2026 vs. 2025
Revenue from Canadian medical cannabis		$	5,979			$	5,839			$	140				2	%		$	18,359			$	18,773			$	(414	)			(2	)%
Revenue from Canadian adult-use cannabis			52,570				49,315				3,255				7	%			179,085				165,627				13,458				8	%
Revenue from wholesale cannabis			1,165				3,893				(2,728	)			(70	)%			6,666				15,993				(9,327	)			(58	)%
Revenue from international cannabis			24,121				13,935				10,186				73	%			57,668				40,991				16,677				41	%
Total cannabis revenue			83,835				72,982				10,853				15	%			261,778				241,384				20,394				8	%
Excise taxes			(19,007	)			(18,708	)			(299	)			2	%			(64,907	)			(60,209	)			(4,698	)			8	%
Total cannabis net revenue		$	64,828			$	54,274			$	10,554				19	%		$	196,871			$	181,175			$	15,696				9	%

For the three and nine months ended February 28, 2026 and February 28, 2025, respectively, cannabis net revenue based on market channel on a constant currency⁽¹⁾ basis was as follows:

		For the three months ended																For the nine months ended
		as reported in constant currency																as reported in constant currency
		February 28,				February 28,				Change				% Change				February 28,				February 28,				Change				% Change
(in thousands of US dollars)		2026				2025				2026 vs. 2025								2026				2025				2026 vs. 2025
Revenue from Canadian medical cannabis		$	5,706			$	5,839			$	(133	)			(2	)%		$	18,260			$	18,773			$	(513	)			(3	)%
Revenue from Canadian adult-use cannabis			50,170				49,315				855				2	%			178,406				165,627				12,779				8	%
Revenue from wholesale cannabis			1,112				3,893				(2,781	)			(71	)%			6,658				15,993				(9,335	)			(58	)%
Revenue from international cannabis			21,410				13,935				7,475				54	%			53,137				40,991				12,146				30	%
Total cannabis revenue			78,398				72,982				5,416				7	%			256,461				241,384				15,077				6	%
Excise taxes			(18,141	)			(18,708	)			567				(3	)%			(64,669	)			(60,209	)			(4,460	)			7	%
Total cannabis net revenue		$	60,257			$	54,274			$	5,983				11	%		$	191,792			$	181,175			$	10,617				6	%

(1)

The constant currency presentation of our Cannabis revenue based on market channel is a non-GAAP financial measure. See "Use of Non-GAAP Measures -Constant Currency Presentation" above for a discussion of these Non-GAAP Measures.

Revenue from Canadian medical cannabis: Gross revenue from Canadian medical cannabis increased to $6.0 million and decreased to $18.4 million for the three and nine months ended February 28, 2026 compared to gross revenue of $5.8 million and $18.8 million for the prior year periods, respectively. On a constant currency basis, gross revenue from Canadian medical cannabis decreased to $5.7 million and to $18.3 million for the three and nine months ended February 28, 2026, respectively. The decrease in gross revenue from medical cannabis, on a constant currency basis, was primarily driven by uninsured patient attrition to the adult-use recreational market, which was partially offset by new insured patient acquisition.

Revenue from Canadian adult-use cannabis: During the three and nine months ended February 28, 2026, our gross revenue from Canadian adult-use cannabis increased to $52.6 million and to $179.1 million, compared to gross revenue of $49.3 million and $165.6 million for the prior year periods, respectively. On a constant currency basis, our gross revenue from Canadian adult-use cannabis increased to $50.2 million and increased to $178.4 million for the three and nine months ended February 28, 2026, respectively. The currency adjusted increase in gross adult-use revenue for the three month period was primarily driven by a $2.7 million increase in the traditional pre-roll category, reflecting the successful launch of innovation SKUs, including Good Supply Double Dutchies. This growth was partially offset by a $2.1 million decline in the whole flower category, primarily due to the commencement of strain rotation within our cultivation program, which temporarily constrained supply. In addition, certain inventory was redirected to international markets, which would otherwise have generated approximately $0.9 million of revenue in the Canadian market. For the nine month period, the currency adjusted increase in gross adult-use revenue was predominantly attributable to a $7.3 million increase in traditional pre-rolls, driven by the aforementioned product innovations, and a $1.7 million increase in whole flower sales, as the strain rotation did not begin until our third quarter. Notably, the Company has continued to invest in its cultivation footprint, including the decision to restart cultivation at its Quebec facility, to support growing demand in both the Canadian and international markets. Given the higher margins generally realized on international cannabis sales, the Company may, when advantageous, continue to allocate inventory to international markets, which could negatively impact Canadian adult-use and wholesale cannabis revenue in future periods as the Company continues to scale its infrastructure.

Wholesale cannabis revenue: Gross revenue from wholesale cannabis decreased to $1.2 million and to $6.7 million and for the three and nine months ended February 28, 2026, compared to gross revenue of $3.9 million and $16.0 million for the prior year periods respectively. On a constant currency basis, gross revenue from wholesale cannabis decreased to $1.1 million and to $6.7 million for the three and nine months ended February 28, 2026, respectively. Due to the transition by many licensed producers in the Canadian market to asset-light business models, the Canadian cannabis industry has experienced a reduction in excess inventory resulting in price increases in the B2B market. As a result of this shift in market dynamics and demand, we continue to evaluate the market and may opportunistically sell into the wholesale market where it makes sense. Specifically, during the three and nine months ended February 28, 2026, wholesale cannabis revenue declined compared to the prior year periods as the Company strategically redirected product to other markets, resulting in a 49% and 47% decrease in wholesale gram equivalents sold, respectively.

International cannabis revenue: Net revenue from International cannabis increased to $24.1 million and to $57.7 million for the three and nine months ended February 28, 2026, compared to net revenue of $13.9 million and $41.0 million for the prior year periods, respectively. On a constant currency basis, given the strengthening of the Euro against the U.S. Dollar when compared to the prior year quarter, net revenue from international cannabis increased to $21.4 million and increased to $53.1 million for the three and nine months ended February 28, 2026, respectively. The increase in net revenue from International cannabis markets during the three and nine months ended February 28, 2026, was primarily attributable to growth in the German medical cannabis market, which increased by $4.0 million and $9.8 million, respectively, the receipt of previously backlogged permits, and an enhanced supply chain. During the three month period, this growth was further supported by a $4.4 million increase in Poland, driven by patient adoption of an in-person prescription model, and a $1.7 million increase in the United Kingdom through our targeted expansion into emerging markets. Despite increased gram equivalents sold, international cannabis revenue was negatively impacted by price compression of approximately $7.0 million and $16.0 million for the three and nine months ended February 28, 2026, respectively. Notwithstanding this pricing pressure, international cannabis sales continue to generate higher margins than Canadian cannabis sales, and the Company remains focused on optimizing its product mix and geographic allocation to maximize profitability.

Distribution revenue

Net revenue from our Distribution segment increased to $83.0 million and increased to $242.3 million for the three and nine months ended February 28, 2026, compared to revenue of $61.5 million and $197.2 million for the prior year periods, respectively. On a constant currency basis, given the change in the Euro and Argentine Peso against the U.S. Dollar in the fiscal quarter, revenue from Distribution increased to $74.0 million and $223.6 million for the three and nine months ended February 28, 2026, respectively. The increase in Distribution revenue for the three month period was primarily driven by a focus on competitive pricing, as evidenced by a 13% increase in average selling price, and a 7% increase in units sold, reflecting greater emphasis on higher-velocity SKUs, as well as favorable foreign exchange impacts. The increase in Distribution revenue for the nine month period was primarily attributable to a 4% increase in average selling price, an 11% increase in volume, and favorable foreign exchange impacts.

Wellness revenue

Our Wellness segment net revenue increased to $16.4 million and to $46.2 million for the three and nine months ended February 28, 2026 compared to $14.1 million and $43.5 million from the prior year periods, respectively. On a constant currency basis for the three and nine months ended February 28, 2026, Wellness segment net revenue increased to $16.1 million and to $46.1 million, respectively. The increase in revenue was driven by our strategic focus on value-add innovations, including high protein super-seeds, better-for-you breakfast products, better-for-you snacking, and the continued success of our Hi-Ball clean energy drinks which contributed approximately $0.5 million and $2.6 million of incremental revenue during the three and nine months, respectively. In addition, the acquisition of Blue Sky Hemp Venture's customer list contributed to the growth of our ingredients sales channel by approximately $1.1 million and $3.0 million of incremental revenue during the three and nine month periods, respectively. The remaining Wellness portfolio contributed approximately $0.6 million of revenue growth during the three month period, reflecting improved demand across certain product lines. However, for the nine month period, revenue from the remaining sales channels declined by approximately $2.1 million, primarily due to a shift in one of our supply agreements within the Club retailer channel. We are actively addressing these challenges through targeted initiatives aimed at improving distribution, assortment optimization, and promotional execution across our Club and Retail sales channels.

Gross profit, gross margin and adjusted gross margin⁽¹⁾ for our reporting segments

For the three and nine months ended February 28, 2026 and February 28, 2025, respectively, our gross profit and gross margin were as follows:

		For the three months ended																For the nine months ended
(in thousands of U.S. dollars)		February 28,				February 28,				Change				% Change				February 28,				February 28,				Change				% Change
Beverage		2026				2025				2026 vs. 2025								2026				2025				2026 vs. 2025
Net revenue		$	42,558			$	55,921			$	(13,363	)			(24	)%		$	148,380			$	174,974			$	(26,594	)			(15	)%
Cost of goods sold			28,977				35,986				(7,009	)			(19	)%			97,741				106,961				(9,220	)			(9	)%
Gross profit			13,581				19,935				(6,354	)			(32	)%			50,639				68,013				(17,374	)			(26	)%
Gross margin			32	%			36	%			(4	)%			(11	)%			34	%			39	%			(5	)%			(13	)%
Purchase price accounting step-up			-				59				(59	)			(100	)%			-				1,610				(1,610	)			(100	)%
Adjusted gross profit (1)			13,581				19,994				(6,413	)			(32	)%			50,639				69,623				(18,984	)			(27	)%
Adjusted gross margin (1)			32	%			36	%			(4	)%			(11	)%			34	%			40	%			(6	)%			(15	)%
Cannabis
Net revenue			64,828				54,274				10,554				19	%			196,871				181,175				15,696				9	%
Cost of goods sold			38,858				32,275				6,583				20	%			121,497				111,804				9,693				9	%
Gross profit			25,970				21,999				3,971				18	%			75,374				69,371				6,003				9	%
Gross margin			40	%			41	%			(1	)%			(2	)%			38	%			38	%			0	%			0	%
Distribution
Net revenue			82,963				61,493				21,470				35	%			242,286				197,175				45,111				23	%
Cost of goods sold			72,951				55,936				17,015				30	%			213,293				175,281				38,012				22	%
Gross profit			10,012				5,557				4,455				80	%			28,993				21,894				7,099				32	%
Gross margin			12	%			9	%			3	%			33	%			12	%			11	%			1	%			9	%
Wellness
Net revenue			16,383				14,092				2,291				16	%			46,203				43,450				2,753				6	%
Cost of goods sold			10,992				9,572				1,420				15	%			31,289				29,791				1,498				5	%
Gross profit			5,391				4,520				871				19	%			14,914				13,659				1,255				9	%
Gross margin			33	%			32	%			1	%			3	%			32	%			31	%			1	%			3	%
Total
Net revenue			206,732				185,780				20,952				11	%			633,740				596,774				36,966				6	%
Cost of goods sold			151,778				133,769				18,009				13	%			463,820				423,837				39,983				9	%
Gross profit			54,954				52,011				2,943				6	%			169,920				172,937				(3,017	)			(2	)%
Gross margin			27	%			28	%			(1	)%			(4	)%			27	%			29	%			(2	)%			(7	)%
Purchase price accounting step-up			-				59				(59	)			(100	)%			-				1,610				(1,610	)			(100	)%
Adjusted gross profit (1)			54,954				52,070				2,884				6	%			169,920				174,547				(4,627	)			(3	)%
Adjusted gross margin (1)			27	%			28	%			(1	)%			(4	)%			27	%			29	%			(2	)%			(7	)%

(1)

Adjusted gross profit is our Gross profit (adjusted to exclude purchase price accounting valuation step-up) and adjusted gross margin is our Gross margin (adjusted to exclude purchase price accounting valuation step-up) for our beverage segment and on a consolidated basis are non-GAAP financial measures. See "Use of Non-GAAP Measures" above for additional discussion regarding these non-GAAP measures. The Company's management believes that adjusted gross profit and adjusted gross margin are useful to our management to evaluate our business and operations, measure our performance, identify trends affecting our business, project our future performance, and make strategic decisions. We do not consider adjusted gross profit and adjusted gross margin in isolation or as an alternative to financial measures determined in accordance with GAAP.

Beverage gross margin: For the three and nine months ended February 28, 2026, our beverage segment generated gross margin of 32% and 34%, respectively, which decreased from 36% and 39% generated in the prior year periods, respectively. Adjusted gross margin was 32% and 34%, which decreased from 36% and 40% generated in the prior year periods, respectively. The change in the beverage gross margin and adjusted beverage gross margin for the three and nine months ended February 28, 2026 was driven by several factors, including our Craft Acquisition II, which historically has operated at a lower gross margin of approximately 25%, declining overhead utilization as our revenue levels have declined, higher input costs and timing delays in realizing the full benefits of our Project 420 cost savings initiatives. Additionally, increased discounting to support sales volume resulted in discounts of 7.2% for the three month period compared to 4.7% in the prior quarter, and 6.6% for the nine month period compared to 4.1% in the prior year period, which negatively impacted margins and was partially offset by reductions in marketing expenditures.

Cannabis gross margin: For the three and nine months ended February 28, 2026, our cannabis segment generated gross margin of 40% and 38%, respectively, which decreased from 41% and remained consistent at 38% generated in the prior year periods, respectively. Although both cannabis net revenue and gross profit increased during the three and nine month periods, gross margin remained largely unchanged. This was primarily due to price compression in international markets, which negatively impacted international cannabis revenue during the three and nine month periods by approximately $7.0 million and $16.0 million, respectively, despite having increased the gram equivalents sold.

Distribution gross margin: For the three and nine months ended February 28, 2026, our distribution segment generated gross margin of 12% and 12%, respectively, which increased from 9% and 11% generated in the prior year periods, respectively. The increase was primarily attributable to a favorable change in product mix, as evidenced by increases in average selling price of approximately 13% and 4% during the three and nine month periods, respectively, as well as initiatives undertaken to reduce input costs.

Wellness gross margin: For the three and nine months ended February 28, 2026, our wellness segment generated gross margin of 33% and 32%, respectively, which increased from 32% and 31% in the prior year periods, respectively. Gross margin remained relatively consistent period over period as strategic price increases largely offset unfavorable changes in sales mix.

Operating expenses

During the three and nine months ended February 28, 2026 and February 28, 2025, respectively, the changes in operating expenses were as follows:

		For the three months ended																For the nine months ended
		February 28,				February 28,				Change				% Change				February 28,				February 28,				Change				% Change
(in thousands of US dollars)		2026				2025				2026 vs. 2025								2026				2025				2026 vs. 2025
General and administrative		$	50,228			$	39,246			$	10,982				28	%		$	142,456			$	129,356			$	13,100				10	%
Selling			10,617				13,905				(3,288	)			(24	)%			35,321				41,757				(6,436	)			(15	)%
Amortization			5,106				23,182				(18,076	)			(78	)%			13,393				67,913				(54,520	)			(80	)%
Marketing and promotion			8,692				6,793				1,899				28	%			28,828				28,079				749				3	%
Research and development			62				85				(23	)			(27	)%			181				250				(69	)			(28	)%
Change in fair value of contingent consideration			-				-				-				NM				(15,000	)			-				(15,000	)			NM
Impairment of intangible assets and goodwill			-				699,235				(699,235	)			(100	)%			-				699,235				(699,235	)			(100	)%
Other than temporary change in fair value of convertible notes receivable			-				20,000				(20,000	)			(100	)%			-				20,000				(20,000	)			(100	)%
Litigation costs, net of recoveries			621				2,758				(2,137	)			(77	)%			2,497				5,254				(2,757	)			(52	)%
Restructuring costs			4,087				6,133				(2,046	)			(33	)%			5,921				17,249				(11,328	)			(66	)%
Transaction costs (income), net			1,927				605				1,322				219	%			2,896				2,563				333				13	%
Total operating expenses		$	81,340			$	811,942			$	(730,602	)			(90	)%		$	216,493			$	1,011,656			$	(795,163	)			(79	)%

Operating expenses are comprised of general and administrative, selling, amortization, marketing and promotion, research and development, change in fair value of contingent consideration, impairment of intangible assets and goodwill, other than temporary changes in fair value of convertible notes receivable, litigation costs, net of recoveries, restructuring costs and transaction costs (income), net. For the three and nine months ended February 28, 2026, operating expenses decreased by $730.6 million and by $795.2 million to $81.3 million and $216.5 million when compared to $811.9 million and $1,011.7 million for the prior year periods, respectively. These decreases were primarily attributable to $699.2 million of non-cash impairments of goodwill and intangible assets and a $20.0 million other-than-temporary decrease in the fair value of the MedMen convertible note recorded in the prior year quarter, which did not repeat in the current period. In addition, the nine month period ended February 28, 2026, had lower amortization expense following the intangible asset impairment recorded during the fiscal quarter ended May 31, 2025, a $15.0 million gain related to the change in fair value of the Montauk contingent consideration, and lower selling and non-recurring litigation, and restructuring costs. These decreases were partially offset by higher general and administrative costs.

General and administrative costs

During the three and nine months ended February 28, 2026 and February 28, 2025, respectively, the changes in general and administrative costs when compared to the prior year period were as follows:

		For the three months ended																For the nine months ended
		February 28,				February 28,				Change				% Change				February 28,				February 28,				Change				% Change
(in thousands of US dollars)		2026				2025				2026 vs. 2025								2026				2025				2026 vs. 2025
Salaries and wages		$	21,925			$	21,908			$	17				0	%		$	68,425			$	66,201			$	2,224				3	%
Office and general			9,916				7,385				2,531				34	%			26,897				26,103				794				3	%
Stock-based compensation			13,725				4,035				9,690				240	%			31,060				18,189				12,871				71	%
Insurance			1,894				2,942				(1,048	)			(36	)%			6,743				8,552				(1,809	)			(21	)%
Professional fees			1,090				1,352				(262	)			(19	)%			3,342				3,656				(314	)			(9	)%
Gain on sale of capital assets			(118	)			(202	)			84				(42	)%			(493	)			(733	)			240				(33	)%
Travel and accommodation			1,014				1,100				(86	)			(8	)%			3,618				4,347				(729	)			(17	)%
Rent			782				726				56				8	%			2,864				3,041				(177	)			(6	)%
Total general and administrative costs		$	50,228			$	39,246			$	10,982				28	%		$	142,456			$	129,356			$	13,100				10	%

Salaries and wages remained consistent and increased by 3% during the three and nine months ended February 28, 2026, when compared to the prior year periods. Included in salaries and wages for the three and nine months ended February 28, 2026, were $0.5 million and $2.3 million, respectively, of retention payments compared to $1.5 million and $3.2 million for the prior year period, respectively. Additionally, period-over-period variability was also impacted by changes in estimates related to discretionary compensation accruals.

Office and general increased by 34% and by 3% during the three and nine months ended February 28, 2026, when compared to the prior year period respectively. The increase in the three and nine months ended February 28, 2026 was primarily due to a $0.7 million increase in bad debt provisions within the distribution business, the inclusion of a full period of costs related to Craft Acquisition II, which was effective September 1, 2024 and contributed approximately $0.6 million to the period-over-period variance, and the absence of a $0.3 million property tax refund recorded in the prior year quarter.

The Company recognized stock-based compensation expense of $13.7 million and $31.1 million for the three and nine months ended February 28, 2026, compared to $4.0 million and $18.2 million for the prior year period respectively. Stock-based compensation expense is primarily driven by time-based vesting schedules and may vary based on assumptions used in valuation and vesting models. The increase during the three and nine month periods was primarily due to the recognition of expense related to performance-based awards following the establishment and approval of their performance criteria during the second fiscal quarter. As a result, performance-based awards contributed approximately $6.3 million and $12.1 million of expense during the three and nine month periods, respectively. Stock based compensation expense in the prior year periods was lower primarily due to the cancellation of certain performance-based awards.

Insurance expense decreased by 36% and by 21% for the three and nine months ended February 28, 2026 to $1.9 million and $6.7 million from $2.9 million and $8.6 million for the prior year period, respectively due to lower premiums as a result of management's decision to self-insure a portion of our property and casualty insurance.

Rent expense increased by 8% and decreased by 6% for the three and nine months ended February 28, 2026 to $0.8 million and $2.9 million compared to $0.7 million and $3.0 million for the prior year periods, respectively. Rent expense is predominantly comprised of operating lease expenses for our brew pubs and office spaces and varies period-over-period based on lease amortization schedules and common area maintenance costs.

Selling costs

For the three and nine months ended February 28, 2026, the Company incurred selling costs of $10.6 million or 5% of net revenue and $35.3 million or 6% of net revenue as compared to $13.9 million or 7% of net revenue and $41.8 million or 7% of net revenue in the prior year period respectively. These costs relate to third-party shipping costs for all segments, in addition to distributor commission incurred by the cannabis segment, Health Canada cannabis fees, and patient acquisition and maintenance costs. The decrease in selling costs for the three and nine months ended February 28, 2026 was primarily driven by lower freight costs in the beverage segment resulting from Project 420 cost-saving initiatives, which improved freight as a percentage of sales by approximately 90 and 144 basis points for the three and nine month periods, respectively. In addition, lower freight costs in the Canadian cannabis segment following contract renegotiations improved freight as a percentage of sales by approximately 180 and 210 basis points for the three and nine month periods, respectively, and were further supported by lower commission rates in the Canadian cannabis sales channels.

Amortization

The Company incurred non-production related amortization charges of $5.1 million and $13.4 million for the three and nine months ended February 28, 2026, compared to $23.2 million and $67.9 million in the prior year periods, respectively, based on depreciable capital and intangible assets useful lives. The decrease in the amortization expense is due to the lower carrying value of intangible assets as a result of the impairment charges recognized during the fiscal year ended May 31, 2025.

Marketing and promotion costs

For the three and nine months ended February 28, 2026, the Company incurred marketing and promotion costs of $8.7 million and $28.8 million compared to $6.8 million and $28.1 million for the prior year periods, respectively and was driven by variability in discretionary marketing spend.

Research and development

Research and development costs were $0.1 million and $0.2 million during the three and nine months ended February 28, 2026, compared to $0.1 million and $0.3 million in the prior year periods, respectively. These costs relate to external expenditures associated with the development of new products.

Change in fair value of contingent consideration

A portion of the total consideration to be paid in connection with the Company's acquisition of Montauk Brewing Company ("Montauk") was contingent upon the achievement by Montauk of certain financial measures as of December 31, 2025. In the event that Montauk achieved either the pre-determined sales volume target or EBITDA target, then $15.0 million of contingent consideration would be deemed earned and payable. If both the sales volume target and the EBITDA target were achieved, an additional $3.0 million would be deemed earned and payable for a total contingent consideration payment of $18.0 million.

For the year ended, May 31, 2025, the Company assessed the estimated value of the contingent consideration liability as $15.0 million, which was estimated to be achieved based on management's forecast, applying a probability of achievement of 100% for the sales volume target and 0% on the remaining criteria, which was not expected to be achieved as EBITDA targets were not forecasted to be met.

During the three months ended August 31, 2025, the Company reassessed the estimated fair value of the contingent consideration liability as $nil, based on subsequent information regarding Montauk's operating results and revised expectations for the remainder of the earn-out period. As a result of lower-than-anticipated sales volumes during the peak selling periods of June, July and August 2025, and the loss of certain national retail programs, management concluded that Montauk no longer had a viable path to achieving the sales volume target or the EBITDA target within the earn-out period. Accordingly, the Company applied a probability of achievement of 0% to the sales volume target and 0% to the remaining criteria. The resulting $15.0 million change in fair value of the contingent consideration liability was recorded within the statement of profit and loss and contributed to the Company's net income generated during the period ended August 31, 2025, despite historically reporting a net loss.

During the three months ended February 28, 2026, the earn-out period concluded and neither financial measure was achieved. Accordingly, no further changes to the fair value of the contingent consideration liability were recognized during the three months ended February 28, 2026 as no contingent consideration obligation was payable.

Impairments

During the fiscal quarter ended February 28, 2026, the Company assessed for indicators of impairment and concluded that there were no indicators and accordingly, no further impairment testing was required and no impairment charges were recognized during the period.

In the prior year period, based upon a combination of factors including a sustained decline in the Company's market capitalization stemming from the uncertainty resulting from certain changes in U.S. global economic policy, including slower than anticipated progress in global cannabis legalization and overall declines in the craft beer industry sector, the Company concluded that it is more likely than not, that the fair value of our reporting units were less than their carrying amounts as of February 28, 2025. Accordingly, the Company utilized the income approach, which uses future discounted cash flows, to determine the fair value of each reporting unit. As a result, the Company recorded non-cash impairment charges of $570.0 million of cannabis goodwill, $100.0 million of beverage goodwill, $25.0 million of wellness goodwill and $4.2 million of distribution goodwill for the three and nine months ended February 28, 2025. The non-cash impairment charge had no impact on the Company's compliance with debt covenants, its cash flows or available liquidity.

In the Company's cannabis goodwill assessment performed during the three and nine months ended February 28, 2025, the Company used a discount rate of 12.00%, a terminal growth rate of 5%, and an average revenue growth rate of 34% over 5 years, based on an 88% and 40% average probability of anticipated EU and U.S. cannabis legalization, respectively and/or changes in drug policy in various countries within the next 5 years. A 1% increase in the discount rate would result in an additional $285.0 million in impairment, a 1% decrease in the terminal growth rate would result in an additional $210.0 million in impairment, a 5% decrease in the average growth rate would result in an additional $170.0 million in impairment, a 5% decrease in the probability of EU cannabis legalization would result in an additional $80.0 million in impairment and a 5% decrease in the probability of US cannabis legalization would result in an additional $7.0 million in impairment. Changes to those probabilities resulting in continued delays in or cessation of legalization of cannabis within the United States and internationally, or adverse regulatory changes to existing legislation, could have an unfavorable impact on the estimated future cash flows, and ultimately, the fair value of the cannabis reporting unit, which may result in a material impairment expense recognized in future reporting periods.

In the Company's beverage goodwill assessment performed during the three and nine months ended February 28, 2025, the Company used a discount rate of 9.25%, a terminal growth rate of 2%, and an average revenue growth rate of 12% over 5 years. A 1% increase in the discount rate would result in an additional $70.0 million in impairment, a 1% decrease in the terminal growth rate would result in an additional $50.0 million in impairment and a 1% decrease in the average growth rate would result in an additional $40.0 million in impairment.

In the Company's wellness goodwill assessment performed during the three and nine months ended February 28, 2025, the Company used a discount rate of 10.50%, a terminal growth rate of 2%, and an average revenue growth rate of 7% over 5 years. A 1% increase in the discount rate would result in an additional $5.0 million in impairment, a 1% decrease in the terminal growth rate would result in an additional $3.0 million in impairment and a 1% decrease in the average growth rate would result in an additional $2.0 million in impairment.

In the Company's distribution goodwill assessment performed during the three and nine months ended February 28, 2025, the Company recorded $4.2 million of impairments which brought the remaining distribution goodwill balance to $nil.

Other than temporary write-down of convertible notes receivable

For the three and nine months ended February 28, 2026, the Company no longer held MedMen Convertible Notes, and thus did not recognize any further changes in fair value.

During the three and nine months ended February 28, 2025, the Company recognized an other-than-temporary change in fair value, which resulted in a non-cash expense of $20.0 million and $20.0 million. The MedMen Convertible Note was valued based upon the estimated fair value of the collateral assets net of estimated disposal costs and has been reduced to reflect recent developments in restructuring efforts.

Subsequent to the impairment recorded during the three and nine months ended February 28, 2025, MedMen exited receivership and substantially all of its remaining assets were transferred to a new entity owned by MedMen's secured creditors, including SH Acquisition. In connection with the foregoing, the Company disposed of its MedMen Convertible Note in exchange for on option to acquire a 68% membership interest in SH Acquisition for $1.00 upon U.S. federal cannabis legalization. See Note 8 (Long-term investments). This option was recorded as a Level 3 equity investment measured at fair value by assessing the discounted cash flows of SH Acquisition.

Litigation costs, net of recoveries

For the three and nine months ended February 28, 2026, the Company recorded $0.6 million and $2.5 million of litigation settlements costs and third-party fees incurred in defending these claims, net of favorable recoveries compared to $2.8 million and $5.3 million in the prior year period respectively. The decrease is related to period-to-period variability as litigation and settlement costs are non-recurring in nature.

Restructuring costs

In connection with the integration of certain acquisitions and strategic transactions, the Company has incurred restructuring and exit costs in the amount of $4.1 million and $5.9 million for the three and nine months ended February 28, 2026, compared to $6.1 million and $17.2 million for the prior year period respectively. All restructuring plans are approved at the executive level, and their associated expenses are recognized in the period in which the plan is committed or otherwise incurred.

Within the Cannabis segment, during the nine months ended February 28, 2026, the Company incurred restructuring expenses totaling $5.2 million. These charges included $3.7 million associated with the restructuring of the Quebec facility to transition from vegetable cultivation to cannabis cultivation in response to increased global cannabis demand, $1.0 million related to employee termination severance and benefits associated with the reorganization of the Canadian cannabis commercial function, and $0.2 million related to the wind-down of certain non-operating entities. Additionally, the Company recognized $0.3 million related to its Fort Collins, CO partially vacant warehouse that was previously held for sale and was divested during the three months ended February 28, 2026. See Note 3 (capital assets).

During the fiscal year ended May 31, 2025, the Company accrued $8.5 million of restructuring charges related to the closure of Hop Valley and other Project 420 initiatives within the Beverage segment, of which $7.5 million was recognized in nine months ended February 28, 2026, thereby reducing the accrual to $1.0 million. In addition, during the three and nine months ended February 28, 2026, the Company incurred $0.7 million of restructuring related expenses associated with the Atwater Brewery, primarily related to the asset being classified as held for sale and additional facility restructuring activities. See Note 3 (Capital Assets).

Transaction (income) costs, net

Transaction (income) costs, net, include non-recurring acquisition related income and expenses, related legal, financial advisor and due diligence cost and expenses and transaction related compensation. For the three and nine months ended February 28, 2026, transaction (income) costs increased to $1.9 million and $2.9 million from $0.6 million and $2.6 million for the prior year periods, respectively. During the three and nine months ended February 28, 2026, transaction costs were primarily attributable to $1.2 million of legacy HEXO pre-acquisition tax settlements and $0.6 million of due diligence costs associated with ongoing transactions. In comparison, transaction costs during the prior year nine month period were primarily comprised of $1.1 million of costs related to the completion of Craft Acquisition II.

Non-operating (expense) income, net

During the three and nine months ended February 28, 2026 and February 28, 2025, respectively, the changes in non-operating (expense), income were comprised of:

		For the three months ended																For the nine months ended
		February 28,				February 28,				Change				% Change				February 28,				February 28,				Change				% Change
(in thousands of US dollars)		2026				2025				2026 vs. 2025								2026				2025				2026 vs. 2025
Change in fair value of warrant liability		$	-			$	1,338			$	(1,338	)			(100	)%		$	(3,495	)		$	2,896			$	(6,391	)			(221	)%
Foreign exchange gain (loss)			12,469				(22,290	)			34,759				(156	)%			9,070				(44,206	)			53,276				(121	)%
Loss on long-term investments			(4,143	)			(5,474	)			1,331				(24	)%			(4,449	)			(5,540	)			1,091				(20	)%
Unrealized loss on digital assets			(214	)			-				(214	)			NM				(386	)			-				(386	)			NM
Other non-operating (losses) gains, net			(20	)			2,404				(2,424	)			(101	)%			(1,126	)			2,219				(3,345	)			(151	)%
Total non-operating income (expense)		$	8,092			$	(24,022	)		$	32,114				(134	)%		$	(386	)		$	(44,631	)		$	44,245				(99	)%

For the three and nine months ended February 28, 2026, the Company recognized a gain on the change in fair value of its warrants of $nil million and a loss of $3.5 million, compared to a gain of $1.3 million and $2.9 million in the prior year periods, as a result of the change in our share price and the exercise price of the warrants. For the three and nine months ended February 28, 2026, the Company recognized a gain of $12.5 million and $9.1 million resulting from the changes in foreign exchange rates during the period compared to a loss of $22.3 million and $44.2 million for the prior year periods. For the three and nine months ended February 28, 2026, the Company recognized a loss of $4.1 million and $4.4 million on long-term investments compared to a loss of $5.5 million and $5.5 million for the prior year periods. For the three and nine months ended February 28, 2026, the Company recognized a loss of $0.2 million and $0.4 million on digital assets from the unrealized change in fair value of Bitcoin compared to $nil and $nil million for the prior year periods. The other non-operating (losses) gains, net were a loss of $0.02 million and a loss of $1.1 million for the three and nine months ended February 28, 2026, compared to a gain of $2.4 million and $2.2 million for the prior year periods, and was mainly comprised of a loss of $1.5 million on the change in fair value of assets held for sale related to Fort Collins, CO partially vacant warehouse, as described in Note 3 (capital assets), offset by a gain of $0.5 million resulting from the exchange transaction of the TLRY 27 Note, as described in Note 12 (Convertible debentures payable).

Reconciliation of Non-GAAP Financial Measures to GAAP Measures

Adjusted EBITDA

Adjusted EBITDA is a non-GAAP financial measure that does not have any standardized meaning prescribed by GAAP and may not be comparable to similar measures presented by other companies. The Company calculates adjusted EBITDA as net loss/net income before income taxes, net interest expense, depreciation and amortization, purchase price accounting step-up on inventory, stock-based compensation, impairments, other than temporary change in fair value of convertible notes receivable, restructuring costs, transaction (income) costs net, litigation costs net of recoveries, change in fair value of contingent consideration, project 420 cost savings initiatives, unrealized currency gains and losses and other adjustments.

We believe that this presentation provides useful information to management, analysts and investors regarding certain additional financial and business trends relating to the Company's results of operations and financial condition. In addition, management uses this measure for reviewing the financial results of the Company and as a component of performance-based executive compensation.

We do not consider adjusted EBITDA in isolation or as an alternative to financial measures determined in accordance with GAAP. The principal limitation of adjusted EBITDA is that it excludes certain expenses and income that are required by U.S. GAAP to be recorded in our consolidated financial statements. In addition, adjusted EBITDA is subject to inherent limitations as this metric reflects the exercise of judgment by management about which expenses and income are excluded or included in determining adjusted EBITDA. In order to compensate for these limitations, management presents adjusted EBITDA in connection with GAAP results.

For three and nine months ended February 28, 2026, adjusted EBITDA increased to $10.7 million and increased to $29.3 million compared to $9.0 million and $27.4 million for the prior year periods and remained improved as we continue to execute on our strategic plan.

		For the three months ended																For the nine months ended
		February 28,				February 28,				Change				% Change				February 28,				February 28,				Change				% Change
Adjusted EBITDA reconciliation:		2026				2025				2026 vs. 2025								2026				2025				2026 vs. 2025
Net loss		$	(25,233	)		$	(793,534	)		$	768,301				(97	)%		$	(67,229	)		$	(913,461	)		$	846,232				(93	)%
Income tax expense (recovery), net			1,974				1,203				771				64	%			3,235				4,125				(890	)			(22	)%
Interest expense, net			4,965				8,378				(3,413	)			(41	)%			17,035				25,986				(8,951	)			(34	)%
Non-operating income (expense), net			(8,092	)			24,022				(32,114	)			(134	)%			386				44,631				(44,245	)			(99	)%
Amortization			16,741				33,546				(16,805	)			(50	)%			48,260				99,410				(51,150	)			(51	)%
Stock-based compensation			13,725				4,035				9,690				240	%			31,060				18,189				12,871				71	%
Change in fair value of contingent consideration			-				-				-				NM				(15,000	)			-				(15,000	)			NM
Impairment of intangible assets and goodwill			-				699,235				(699,235	)			(100	)%			-				699,235				(699,235	)			(100	)%
Other than temporary change in fair value of convertible notes receivable			-				20,000				(20,000	)			(100	)%			-				20,000				(20,000	)			(100	)%
Project 420 business optimization			-				2,600				(2,600	)			(100	)%			200				2,600				(2,400	)			(92	)%
Purchase price accounting step-up			-				59				(59	)			(100	)%			-				1,610				(1,610	)			(100	)%
Litigation costs, net of recoveries			621				2,758				(2,137	)			(77	)%			2,497				5,254				(2,757	)			(52	)%
Restructuring costs			4,087				6,133				(2,046	)			(33	)%			5,921				17,249				(11,328	)			(66	)%
Transaction costs (income), net			1,927				605				1,322				219	%			2,896				2,563				333				13	%
Adjusted EBITDA		$	10,715			$	9,040			$	1,675				19	%		$	29,261			$	27,391			$	1,870				7	%

Adjusted EBITDA should not be considered in isolation from, or as a substitute for, net income (loss). There are a number of limitations related to the use of Adjusted EBITDA as compared to net income (loss), the closest comparable GAAP measure. Adjusted EBITDA adjusts for the following:

●

Non-cash amortization expenses and, although these are non-cash charges, the assets being depreciated and amortized may have to be replaced in the future;

●

Stock-based compensation expenses, a non-cash expense and are an important part of our compensation strategy;

●

Non-cash impairment charges, as the charges are not expected to be a recurring business activity;

●

Non-cash other than temporary write-down of convertible notes receivable, as the charges are not expected to be a recurring business activity;

●

Non-cash foreign exchange gains or losses, which accounts for the effect of both realized and unrealized foreign exchange transactions. Unrealized gains or losses represent foreign exchange revaluation of foreign denominated monetary assets and liabilities;

●

Non-cash change in fair value of warrant liability;

●

Non-cash change in fair value of contingent consideration;

●

Project 420 business optimization costs;

●

Interest expense, net;

●

Costs incurred to start up new facilities, and to fund emerging market operations;

●

Transaction (income) costs, net which includes acquisition related income and expenses, related legal, financial advisor and due diligence cost and expenses and transaction related compensation, which vary significantly by transaction and are excluded to evaluate ongoing operating results;

●

Restructuring charges;

●

Litigation costs, net of favorable recoveries and the third party fees associated with defending these claims, including costs related to legacy and non-operational litigation matters, legal settlements and recoveries;

●

Amortization of purchase accounting fair value step-up in inventory value included in costs of goods sold; and

●

Current and deferred income tax expenses and recoveries, which could be a significant recurring expense or recovery in our business in the future and reduce or increase cash available to us.

Adjusted Gross Profit and Adjusted Gross Margin

Adjusted gross profit and adjusted gross margin are non-GAAP financial measures and may not be comparable to similar measures presented by other companies. Adjusted gross profit is our Gross profit (adjusted to exclude PPA valuation step-up) and adjusted gross margin is our Gross margin (adjusted to exclude PPA valuation step-up) and are non-GAAP financial measures. The Company's management believes that adjusted gross profit and adjusted gross margin are useful to our management to evaluate our business and operations, measure our performance, identify trends affecting our business, project our future performance, and make strategic decisions. We do not consider adjusted gross profit and adjusted gross margin percentage in isolation or as an alternative to financial measures determined in accordance with GAAP.

Liquidity and Capital Resources

We actively manage our cash, marketable securities and digital assets in order to internally fund operating needs, make scheduled interest and principal payments on our borrowings, and complete acquisitions. We believe that existing cash, cash equivalents, marketable securities, Bitcoin digital assets and cash generated by operations, together with access to external sources of funds, will be sufficient to meet our domestic and foreign capital needs for the short and long term outlook.

For the Company's short-term liquidity requirements, we are focused on generating positive cash flow from operations and being free cash flow positive. Certain of our business segments, such as cannabis, are working capital intensive and have longer cash conversion cycles. In order to mitigate these effects, management continues to optimize our infrastructure, headcount, as well as the elimination of other discretionary operational costs. Additionally, the Company continues to work on improvements to the cash conversion cycles across its businesses and invest our excess cash in short-term marketable securities, which are comprised of U.S. treasury bills, high grade corporate bonds and term deposits with major Canadian, European and Australian banks as well as in digital assets.

For the Company's long-term liquidity requirements, we are focused on funding operations through profitable organic growth and through acquisitions of businesses that are accretive to earnings and are less working capital intensive. We may need to take on additional debt or equity financing arrangements in order to achieve these target goals on a long-term basis.

On May 17, 2024, the Company entered into an equity distribution agreement with TD Securities (USA) LLC and Jefferies LLC in connection with an aggregate offering value of up to $250 million through an at-the-market equity program ("ATM Program"). During the nine months ended February 28, 2026, the Company issued 6,777,224 shares under the ATM Program generating gross proceeds of $76.6 million. The Company paid $3.5 million in commissions and other fees associated with these issuances generating net proceeds of $73.1 million. The Company used the net proceeds from the ATM Program to fund strategic and accretive acquisitions or investments in businesses and capital expenditures for acquired businesses, including potential acquisitions of assets to capitalize on expected regulatory advancements or expansion opportunities. As of our second fiscal quarter ended November 30, 2025, the ATM program was completed.

Additionally, we are committed to optimizing our capital structure and enhancing financial flexibility as we intend to continue to opportunistically purchase or exchange equity for the TLRY 27 Notes prior to their underlying maturity date in June 2027, subject to market conditions.

The following table sets forth the major components of our statements of cash flows for the periods presented:

		For the three months ended								For the nine months ended
		February 28,				February 28,				February 28,				February 28,
		2026				2025				2026				2025
Net cash provided by (used in) operating activities		$	(21,942	)		$	(5,761	)		$	(31,820	)		$	(81,792	)
Net cash provided by (used in) investing activities			28,917				(119	)			(4,621	)			(60,239	)
Net cash provided by (used in) financing activities			(5,128	)			18,071				62,820				116,864
Effect on cash of foreign currency translation			955				(1,933	)			1,460				(3,217	)
Cash and cash equivalents, beginning of period			246,703				189,698				221,666				228,340
Cash and cash equivalents and restricted cash, end of period		$	249,505			$	199,956			$	249,505			$	199,956
Marketable securities			15,312				48,458				15,312				48,458
Cash, restricted cash and marketable securities(1)		$	264,817			$	248,414			$	264,817			$	248,414

Within the consolidated statements of cash flows, cash and cash equivalents includes $44.9 million of restricted cash as of February 28, 2026, and $nil as of February 28, 2025.

(1)

Cash and marketable securities are non-GAAP financial measures. See "Use of Non-GAAP Measures" above for additional discussion regarding these non-GAAP measures. The Company combines the Cash and cash equivalent financial statement line item, and the Marketable securities financial statement line item as an aggregate total as reconciled in the liquidity and capital resource section below. The Company's management believes that this presentation provides useful information to management, analysts and investors regarding certain additional financial and business trends relating to its short-term liquidity position by combing these three GAAP metrics.

Cash flows from operating activities

The change in net cash used in operating activities was ($21.9) million and ($31.8) million for three and nine months ended February 28, 2026, compared to ($5.8) million and ($81.8) million for the prior year periods. Excluding the impact of changes in working capital, operating cash flow was $3.4 million and $11.1 million for three and nine months ended February 28, 2026, compared to cash used in operations of ($9.4) million and ($30.3) million in the prior year periods, which were negatively impacted by the integration of Craft Acquisition I and II. The increase in cash used for working capital during the three months ended February 28, 2026 primarily reflects preparation for a seasonally higher fourth quarter.

Cash flows from investing activities

The change in net cash provided by (used in) investing activities was $28.9 million and ($4.6) million for three and nine months ended February 28, 2026, compared to ($0.1) million and ($60.2) million for the prior year periods, and was a result of the change in investments in marketable securities in the current periods and that Craft Acquisition II occurred in the prior year period.

Cash flows from financing activities

The change in cash provided by financing activities was ($5.1) million and $62.8 million for three and nine months ended February 28, 2026, compared to $18.1 million and $116.9 million for the prior year periods primarily due to variability in funds provided under the ATM Program.

Contingencies

In addition to the litigation described in the Part II, Item 1 - Legal Proceedings, the Company is and may be a defendant in lawsuits from time to time in the normal course of business. While the results of litigation and claims cannot be predicted with certainty, the Company believes the reasonably possible losses of such matters, individually and in the aggregate, are not material. Additionally, the Company believes the probable final outcome of such matters will not have a material adverse effect on the Company's consolidated results of operations, financial position, cash flows or liquidity.

Critical Accounting Estimates

Our financial statements are prepared in accordance with accounting principles generally accepted in the United States. The accounting principles we use require us to make estimates and assumptions that may impact the reported amounts of assets and liabilities as of the date of the financial statements and amounts of income and expenses during the reporting periods presented. We believe in the quality and reasonableness of our critical accounting policies, however, materially different amounts may be reported under different conditions or using assumptions different from those that we have applied. The accounting estimates that have been identified as critical to our business operations and to understanding the results of our operations pertain to revenue recognition, valuation of inventory, valuation of long-lived assets, goodwill and intangible assets, stock-based compensation and valuation allowances for deferred tax assets. The application of each of these critical accounting policies and estimates is discussed in Part II, Item 7, Management's Discussion and Analysis of Financial Condition and Results of Operations set forth in, our Annual Report on Form 10-K for the fiscal year ended May 31, 2025.

Recently Issued Accounting Pronouncements

A description of recently issued accounting pronouncements that may potentially impact our financial position and results of operations is disclosed in "Part I, Item 1. Note 1 - Basis of presentation and summary of significant accounting policies" to our financial statements appearing elsewhere in this Quarterly Report on Form 10-Q.